Business Administration

Question	Answer
What is the difference between an enterprise and a household?	An enterprise is defined as an entity which is meant to generate income whereas a household is an entity where money is consumed = spent.
By which factors are decisions determined?	1. By the aims , 2. by the possible actions, 3. by the consequences of the possible actions and the value which is attributed to those consequences with regard to the aims
The person reacts as follows: „Well, I think there must be a possibility to have 200.000 EUR and yet not dismiss anybody“ What is wrong?	The decision-maker decides for an alternative which does not exist. That is not possible.
Which reasonable reactions do you know if an aim can not (or: no longer) be achieved by any possible alternative?	Then one must either change the aim or look for other, additional alternatives.
What is the „economic principle“?	Economic principle means to act economically, i.e. not to waste something.
Which two alternatives do you know of the economic priciple?	There are two ways: 1) To realize a given output with the minimum input. 2)OR to achieve a maximum output with a given input.
Please name the 5 tasks of management.	1. Fixing the aims, 2. planning 3. decision making 4. realization = organization, 5. control
Define Sole tradership	- The owner himself/herself is the person who is bound by all contracts concerning the enterprise - Everyone in the enterprise acts in HIS/HER name Every right and obligation concerning the enterprise is HIS/HER obligation
Define Juridical person	A FICTITIOUS person is constructed which is regarded as the owner of the enterprise. All people acting for the enterprise are acting in the name of that juridical person. All property of the enterprise is property of THAT person
Define Partnership	SEVERAL persons (at least: two) TOGETHER own the enterprise, TOGETHER they own the property of the enterprise. Every contract involving the enterprise is made in THEIR name TOGETHER,
Please, name five examples for juridical persons	1. (private)Limited company 2. (public) limited company 3.European Society 4. European Cooperative Society 5. Corporation
HOW does a juridical person come into existence?	By the law that everyone must do AS IF such a person exists. Starts at the time when this person is REGISTERED into the relevant public register.
HOW does a juridical person existence end?	When this juridical person is REMOVED FROM THE REGISTER by the decision of the competent authority.
How can it be PROFITABLE to found a juridical person?	In most kinds of juridical person, the money earned by the juridical person is transferred to the shareholders by law
If the legal representative of a limited company – eg. the Managing Director – concludes a contract in the name of the Ltd: who is then the contracting party and can be made responsible for the fulfillment of that contract?	From the legal point of view, THE LIMITED COMPANY acted. Manager acted only „as representative“
Please define the word (simple) „partnership“	Partnership = an association of several persons (=at least two!) acting together with a common aim.
If a „partnership“ under German civil law has the aim to run an enterprise – and that is an enterprise of a major importance : to which special kind of partnership is that partnership then automatically transformed?	„Offene Handelsgesellschaft“ = oHG Special rules apply under the COMMERCIAL CODE
Is a „GmbH & Co KG“ a juridical person, or a partnership?	„KG“ is a limited partnership – one of the partners (at least) is fully liable for the debts of the partnership Now, a GmbH & Co KG is just a simple, normal KG where the general partner is a juridical person, a GmbH.
Please name five aspects which you would take into account if you had to choose the location for a new enterprise!	1. The quality and quantity of the employees available there 2. The juridical frame for employment contracts in that country 3. The availability of property (Firmengrundstück) 4. The laws applicable to the planned activities in that country 5. The possibility to get the needed raw materials 6. The possibility to transport the finished products to the customers
What is „assembly line production“? Give an explanation!	A way of production where the individual working places are strictly arranged according to the time sequence of working steps. The flexibility is low, but a high productivity is possible.
What is workstation production?	A way of production, where similar working steps are concentrated in the same rooms, but there is no technically fixed sequence in which the working steps must be performed after another.
For which kind of organizing the production is the following chart characteristic: A -> B -> C -> D -> E -> F -> G -> H	Assembly line production
Workstation production is very flexible. What is its disadvantage?	The workpieces must be often TRANSPORTED from one working station to next one, and the costs time and „jams“ when the workpieces have to WAIT for the next working step to be done.
Why may the purchase of a machine with a high price be more attractive than the purchase of one with a low price?	If the VARIABLE costs of the expensive machine are lower than those of the low-price machine, then the advantage in the variable cost will, from a certain amount of pieces produced, compensate the higher purchase price.
Please explain why the amount of fixed costs per item decreases with increasing number of items produced!	The fixed costs remain the same, independent from the number of pieces produced So, if the fixed costs are are divided by a low number the result is higher than if they are divided by a higher number.
How would you define „materials management“?	The the activities necessary to secure the supply of raw materials and other materials needed to secure the ability to keep up the production.
WHY is not only the PRICE, but even more the RELIABILITY of a supplier important for an enterprise?	If a supplier does not deliver the materials ordered in time, then the production perhaps can not go on. The consequence would be that costs for workers and other costs most be paid, but nothing can be produced; so a great loss is caused. Also orders can not be fulfilled in time because the necessary parts can not be produced in time. (Damage claim possible).
An enterprise wants not to be dependent on ONE supplier alone, so it gives its orders to 3 different suppliers. The idea is that one is, this way, protected against the risk that one of the suppliers fails to deliver. Are there, nevertheless, still risks that the enterprise can not produce because of nondelivery from the supplier? Can you imagine conditions where that might be the case?	If ALL the three suppliers need material from ONE AND THE SAME pre-supplier, the ability of ALL THREE to produce the needed products is in danger, if something happens to that ONE presupplier. IF such a risk exists, can be checked by checking the „supply chain"
Which factors influence the optimal quantity for ordering a certain good?	1. The number of orders per year x the amount per order= the amount needed per year 2. The cost of one single ordering process x the number of orders per year =the amount of ordering costs per year PLUS the amount of storage costs per item per day times 365 days x ½ of optimal order quantity in Stock
Please give a definition for the term „marketing“!	Marketing means the conceiving and performing of - Concepts for products - Setting the price - Advertising and promotion - And distribution - > In order to satisfy the needs of both the supplier and the customers
Which 8 functions of marketing can be seen as relevant?	1) buying 2) selling 3) transportation 4) storage 5) quality and quantity 6) financial 7) risk 8) marketing information
Why does marketing do research concerning the needs of people?	Because it is the aim of marketing to facilitate processes which satisfy the needs of suppliers and customers, in order to be able to do this, it is necessary to KNOW the needs of the customers or potential customers. So, research is necessary
How far does the function „transport“ have to do satisfy the needs of customers (and suppliers)?	If one has the aim to satisfy the needs of customers, it is necessary to KNOW where the customers need the products, at which time and the ways how the products can be brought there == to know the TARGET
Why is it one of the functions of marketing to know about the risks in the behaviour of people?	If one has the aim to MAKE POSSIBLE transactions between supplier and customer, it is necessary to know about the risks of which such transactions might fail.
What is market segmentation?	Identifying groups of similar persons existing in the market
Please name some ways to define market segments!	1. Geographically 2. Demographically 3. Orientated on Lifestyle 4. Orientated on the quantity of consumption (volume-orientated)
Which 5 phases does a consume decision have?	1. problem recognition 2. information search 3. alternative evaluation 4. purchase decision/ decision not to purchase 5. postpurchase evaluation
Which factors influence the consumer´s decision to buy?	Psychological influences: Perception, attitudes, learning,motivation Sociocultural influences: Reference groups; family, social class; culture, subculture Marketing mix influences: Product, price, place, promotion Situational influences: Type of purchase, social surroundings, physical surroundings, previous experience
What are the „4 P´s“ of marketing, i.e. the possibilities of marketing to act?	Product Price Place Promotion
Please explain what marketing means by „total product offer“.	The thesis is that the buyer perceives not only the product, but ALL what is connected with the product (i.e. package, service, delivery time, guarantees, atmosphere during the purchase.= as an entity and decides on THIS entity.
How is the term „organization“ defined?	1. A set of rules which determines the events in an enterprise 2. The process of creating/establishing these rules
Please describe which advantages or disadvantages are connected with establishing general rules (in comparison to specific decisions in single cases)	General rules: - Suitable for: all what happens more than once and is similar - Advantage: the efforts and time for decisions is only necessary ONCE; more time for optimal solutions can be afforded - Disadvantage: inflexibility. Rule might be applied to situations where it is sub-optimal. Adapting the rules to changed circumstances may be delayed too long. Specific rules: - Individual aspects can be taken into account better - Persons involved have more freedom to decide - Can take more time and effort?
What is meant by the „substitution principle of organization“?	The more events are repeated in an enterprise in a similar, regular way, the more individual decisions can be replaced by general rules
Which 2 ways of forming positions for employees might be distinguished?	Forming positions: A) abstract way: the position is formed, then an adequate candidate is looked for, having the necessary abilities B) person-orientated way: the person is already chosen, the task which are to be assigned to the position are defined according to his/her abilities
What is a „span of control“, and on which factors does its maximum depend?	The number of subordinates controlled by an executive - Maximum depends on: tasks, possible communication, possibilities for control
Please explain the term „staff-line-system“!	Describing the structure/hierarchy in an enterprise. Each person has to take orders only from his/her immediate superior and gives orders to his/her subordinates (line-system), but where are several departments in which experts are working who offer their special knowledge to the decision makers in the line.
Which 2 factors determine the performance of a person?	The ABILITY to perform a task and the MOTIVATION to do so.
How is the intensity of a motivation to do s.th. determined?	VALUE of the result to be expected for that behavior TIMES probability which is assigned to that result
Please describe MASLOW´s theory on the hierarchy of needs!	According to Maslow, human beings do never feel all their needs simultaneously, and they only react to motivation concerning the needs which they currently have. 1. Physiological needs: food, drink, housing 2. Safety needs: the expectation that food, drink will be there in the future 3. Social needs: the need to feel loved, accepted, and part of a group of human being 4. Esteem needs: the need for recognition, acknowledgement, self-respect, status, importance 5. Self-actualization needs: the need to develop one´s fullest potential.
Use Maslow´s theory to explain why certain incentives do work in Germany but not in a country with lower wages (or the other way round) – and why certain incentives which worked very well in Germany some decades ago are no longer attractive in Germany of today.	Higher needs only come into play, if the elementary needs are satisfied. In some countries with lower wages, the lower needs are not satisfied and so the higher needs are not so important for the people. In Germany, the people are more willing to satisfy their higher needs, so incentives that will satisfy higher needs will work in Germany, but not in countries with lower wages.
Motivation by „negative remuneration“ i.e. by PUNISHMENT: Why does this NOT work with all people?	Motivation = value of the result TIMES probability for the result If the person in question regards the probability that punishment will really be inflicted as LOW, then the motivation effect can not work.
What is the `financial equilibrium´?	Means the state (German: Zustand!) in which it is secured that an enterprise has the ability to fulfill all its financial obligations on the dates when they are due.
The primary aim of financial management is to secure the financial equilibrium. What is the secondary (additional) aim which finance management follows within the range which the fulfillment of aim no.1 still lets over?	Secondary aim of finance management = To make a contribution to the maximizing of profits through lowering the costs for borrowing capital and/or generating revenues from interest as much as possible.
What is the consequence of an insolvency?	The owner of the enterprise loses its right to dispose of his/her/its property: The insolvency administrator takes over the administration of the property with the aim to transform the property into money with which one can pay off the debts.
Is it- in Germany! – a crime to become insolvent?	No, a crime is only given if one has delayed the opening of the insolvency proceedings.
What are the reasons for insolvency in case of a natural person?	Under German law, there is only ONE reason for insolvency in case of a NATURAL person: the disability to pay.
Which 3 measures can an insolvency administrator take in order to use the property of the insolvent person to cover the debts?	1. Sale of the enterprise as a whole 2. Sale of the assets of the enterprise individually 3. Proposal of an insolvency agreement where the creditors renounce on a certain percentage of their claims in exchange for getting paid the rest of their claim plus interest according to plan agreed upon between the insolvent person and the creditors.
What is „return on equity“? What can this ratio be used for?	Defined as: profit divided by equity. Gives information how many percent are generated as profit by ones invested capital. Enables the investor to compare with the profit he/she would have received from other investments, i.e. from a banking account.
How does the so-called leverage effect work?	The leverage effect means that the return on equity is pushed up (or, sometimes: pushed down) by using loans. This works this way: Every capital produces a certain return. Not all of this return is needed to pay the interest for that capital. So, the rest remins for the enterprise and becomes a part of the profit. So, the ratio „profit divided by equity“ (return on equity) is pushed up. This happens the more, the more loans are used. On the other hand, if, by bad luck, the capital invested does not produce a return higher than the interest rate, then the enterprise has to pay for the borrowed capital more than this capital produced. That difference must then be taken out of the profit which has been produced by the equity. So, the ratio „profit by equity“ goes down. So, the leverage effect can have negative effects, too.
What is the difference between „static“ and „dynamic“ methods for forming an opinion on the attractivity of an investment?	Static methods do not take interest effects into account, dynamic methods do.
1) What is the „present value“ of the following project: Necessary investment in t0= -20.000 EUR Payments to be received in t1= 11.000 EUR Payments to be received in t2=12.100 EUR Interest rate applicable during all periods: 10% 2) Will the atractivity of that project go up or go down if the interest rate goes up to 15%?	11.000 discounted by (1+0,1) -> divided by 1.1 = 10.000 EUR in t0 12.100 discounted TWICE by (1+0.1) -> divided by 1.21 = 10.000 EUR in t0 -> Present value is: -20.000 + 10.000 +10.000 -> the present value is exactly ZERO. -> If interest rate goes up, then the present value will go down -> attractivity goes down
What is the „internal interest rate“ for the following project? T0= -10.000 T1= +5.500 T2= +6.050	The solution is: 10%. Proof: 5500/1,1 = for One year = 5000 6050/1,1^2 = 6050/1,21 = 5000 -10 000 + 5000 + 5000 = 0
What is the internal interest rate?	The interest rate up to which the interest rate may go up before the present vale of the project becomes ZERO.
Please name some external persons interested in the financial report (=balance sheet + profit & loss statement)	- Banks (to form an opinion on The question if loans can be given) - Employees (is job secure? How much chances are there for a successful claim for an increase of payment?) - Trade Unions (claims for payment increases?) - Competitors - The state (possible demands for taxes?)
Which part of accounting are MORE regulated by law – accounting for internal purposes or for external purposes?	For external purposes, because these provide information for people from outside. So there have to be rules, which information should be given to people from outside and which not. For internal purposes, one may process information as one wants and is in no way restricted.
What is meant by „double bookkeeping“ and what is the advantage among others?	Double bookkeeping is a system where each transaction is usually registered in TWO accounts simultaneously. That systems has, among others, the advantage that calculation errors, transferring errors and falsifications can better be detected.
What is a "T-account"?	A t-account is the historical standard form of an account in double bookkeeping. The account has two sides, separated by a lign in the middle. On the left side, the increases are registered, on the right side, the decreases.
Which 4 types of accounts exist in double bookkeeping?	1.Active accounts 2.passive acounts, 3.expense accounts, 4. revenue accounts
How are the two charts/ statements/ tables called which show – for one economic year – an overview of the property of the enterprise and of profit and loss?	- Balance sheet (overview over assets and liabilities and equity) - Proft & loss statement (overview over revenue and expense accounts)
„The balance sheet gives an overview over the property of the enterprise DURING AN ECONOMIC YEAR“ – is that statement correct?	No. The property can only be shown on a given DATE, because it usually changes every day.
How is „equity“ defined?	Equity = value of all the assets of the enterprise minus the liabilities ---> that is naturally that what belongs to the enterprise itself…
What is a „provision“ if one speaks about a debt?	With reference to a debt, a „provision“ is made for a liability which is yet not certain, either with regard to its existence, its amount or the date when it has to be paid.
What is „depreciation“?	Acquisition price of a good is attributed in defined portions as expense to the years in which the good is used by the enterprise.
Which different kinds of balance sheets do you know?	1. Commercial Balance Sheet 2.Tax Balance Sheet 3. IFRS-balance sheet
Enterprise which are established in WHICH legal form must publish their financial reports – balance sheet and p&L statement – in all states of the EU?	Limited companies, i.e. public limited companies or private limited companies
What is an „auditor“ (with reference to a balance sheet)	Somebody who has the task to review the bookkeeping and financial report of an enterprise with regard to the question if those are in line with the law. An auditor is an independent person, not employed by the enterprise, but acting independently although paid by the enterprise for his service.
Please explain why „imputed costs“ are necessary	Imputed costs are necessary because sometimes, without take those amounts into account, economic decisions would be made on a wrong basis, for example, some alternatives would be regarded as cheap although in reality they are NOT.
Your payments for social security are called „social security contributions“ – why?	You MAY visit a doctor or you MAY loose your job, but you are not forced to - so you can, but you do not necessarily get something in return for your payment.
Which 3 conditions must be fulfilled to make an attempt to save taxes a crime?	Wrong information given to or right information withheld from the fiscal authorities; Leading to a tax advantage, Done on purpose
How long is the deadline for objections against a tax notice in Germany?	1 Month

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	Created by Simon Zweigler over 8 years ago